Recently, Reuters reported that Telefonica S.A. (TEF), the Spanish telecom behemoth which has a strong presence in Mexico, is considering a business agreement with Grupo Televisa S.A.B. (TV). Televisa is the undisputed leader in the broadcast TV industry in Mexico.
Reuters stated that Telefonica may provide a mobile virtual network operator (MVNO) status to Televisa, through which the latter foray into the lucrative Mexican wireless market using Telefonica’s network.
Telefonica may tie-up with Televisa’s industry leading cable TV channels or the two entities can form a formal joint venture. In 2010, Televisa abandoned its wireless venture with Nextel de Mexico, a subsidiary of NII Holdings Inc. (NIHD) owing to prolonged legal disputes.
In Jun 2012, Televisa acquired a 50% stake in small-sized wireless operator Grupo Iusacell for a consideration of $1.7 billion. Recently, the company has decided to sell that stake as Iusacell is currently under bankruptcy.
Grupo Salinas, the remaining 50% share holder of Iusacell will purchase Televisa’s 50% for a consideration of $717 million. In Jul 2014, an unconfirmed industry report stated that Telefonica was aiming to acquire full control of Grupo Iusacell.
The government of Mexico has decided to reform its highly monopolistic telecommunications sector, predominantly the wireline and wireless phone segments and the cable and satellite TV segments.
In this regard, regulator Federal Telecommunications Institute (IFT) identified telecom behemoth America Movil S.A.B. (AMX) and broadcasting giant Televisa as the dominant players in the respective markets.
Nevertheless, the telecommunications industry reform bill of the Mexican government may pave the way for Televisa to capture a large chunk of the wireless market share. The new regulations will also allow America Movil to enter the broadcasting market of Mexico.
However, the rules defer American Movil’s television expansion plans by at least two years. During this period, Televisa can reformulate its broadcasting and media strategy and can take strategic decisions to capitalize on the lucrative wireless industry of Mexico.
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